49. Customers Are Cocreaters
If your objective is to improve customer experience, there are several ways you can integrate customer experience into different parts of the value chain process, from product conceptualization to marketing. For example, you can create an interactive Web site that enables customers to customize products and make design suggestions. Ducati Motor Holdings, makers of the sexy Italian motorcycle, invite customers to visit their virtual Tech Café where they can present designs and ideas. Hallmark cards encourages customer to submit ideas and suggestions on both products and channels. Nike engages customers in coproducing products via their Web site. Volvo has been able to increase time to market by involving customers in virtual product concept tests during the product development process.1
For many years, the software industry has engaged customers to improve products as well as participate in the role of product support specialist by providing advice and support to their peers. This is often done through “user groups,” which have become a critically important customer group in most software companies like Cisco and Microsoft. Software companies also have development groups where members develop new products that are an extension of the company’s platform technology. Groups take on the role of product conceptualizer, designer, tester, and/or product marketer.
In all of these examples, customers play an important functional role that actually helps companies improve several parts of their business. Another outcome is improved customer experience and deeper customer relationships.
The $1 Million Prize
Netflix launched the ultimate contest when it challenged customers and innovators to improve the company’s ability to accurately predict movie preferences in the recommendation system by 10 percent. The prize: $1 million. This was a challenge that Netflix scientists had been working on for over a decade and were unable to solve. It took three years for a group of seven team members from Austria, Israel, Canada, and the U.S. to develop the winning algorithms. The group of statisticians, software and electrical engineers, and researchers and was originally comprised of three teams that competed against each other but decided to join forces in the eleventh hour to collaborate and win. In fact, the submission was entered just 24 minutes prior to the conclusion of the contest in July 2009, nearly three years after the launch of the Netflix Prize.
The contest was truly innovative on several levels. Netflix released private data consisting of 100 million anonymous movie ratings rated on a scale of one to five stars. Teams and contestants formed their own groups, many collaborating virtually around the world. The winning team had never met each other until they traveled to New York to collect their prize. The $1 million is a large sum to the winners, but was a relatively small investment for Netflix considering their own team had worked on cracking the code for over ten years. It’s also a huge win for customers as the recommendation engine is one of the most important benefits of the Netflix service. Another surprising uniqueness of the competition is who owns the intellectual property. The winning team was required to publish its methodology so that other people and businesses could benefit. The team licensed its work to Netflix and is free to license it to other companies.2
The competition was so successful that Netflix immediately announced a second contest to win $1 million prize. This time the challenge is much harder: To predict movie enjoyment by members who do not rate movies. Demographic and psychographic data will be provided to contestants who will compete in the 18-month-long contest.
When companies collaborate with customers to solve problems, it opens the door to accelerate innovation and customer experience on several levels. The ideas presented in this chapter can be applied to any business in any industry to improve customer relationships and add value to all stakeholders. Develop customer strategies with an open mind and creative spirit. When you allow customers to challenge you to improve service and experience, your company will be better as a result.
Customer Engagement: A New Business Model
Threadless is a company that has created an entirely new business model that is built entirely around the customer. In fact, the customer does all of the sales, marketing, and design for the company. Founder Jake Nickell has taken a commodity business, making T-shirts, and completely reinvented the company so the customer makes most of the decisions, and does so virtually. Nickell started the company like a lot of entrepreneurs do—by accident.
Nickell was a CompUSA salesperson who spent his evenings as a part-time art student. He enjoyed dabbling in Web design and conversing online with other like-minded illustrators who were part of Dreamless.org., an online forum for illustrators. Members passed designs back and forth to see who could create the best design. When Nickell won a design contest, it gave him the idea to make a real business of it. He teamed up with friend, Jacob DeHart, and they held their first T-shirt design contest in November 2000. Illustrators from the forum submitted designs for the contest and voted for their favorites. The $12.00 T-shirts sold out quickly because the customers designed them, liked them, and wanted to own what they had actually created. They also wanted to tell friends, family, and of course other designers to buy their designs. Since T-shirts designs sold out quickly, it eliminated unwanted inventory, a problem most T-shirt manufacturers and retailers are forced to deal with.
Artists loved having their designs selected and purchased by other designers because there were few places for designers to show their work. Word about Threadless spread in the design community, and by 2002, Threadless had sold $100,000 worth of T-shirts and built a community of 10,000 members. By 2006, sales had reached $18 million and members grew to an astonishing 700,000. In 2007, sales grew another 200 percent, to an estimated $30 million.3 2007 was the peak year for memberships with more than 200,000 members joining the community.
Threadless is a new business model that is entirely built around what the customer wants. Its shareholders are the community. If an innovative business model can be created based on something as ordinary as a T-shirt, what can you create with your customers?